Mortgage approvals down a quarter in a year

Posted on 29 April 2008 by Katie Tucker

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House price values and mortgage approvals will inevitably follow each other, because in a rising market, more people see investing in a house as a good idea so go out and get a mortgage, and equally, a sudden lack of mortgages will result in fewer people able to buy houses.  The Bank of England reports that only 220,000 mortgages were approved in March, which takes the average to 24% less than last year.

New purchases faired the worst, down 44% on last year.  That 44% of borrwers is the first time buyers with no deposits, the borrowers with heavy credit problems in the past, and the buy to let landlords with minimal rental income to cover their mortgage payments.  These groups have now found themselves ejected from the melting pot of buyers.

Yesterday the Land registry announced that property had fallen in value by 0.4% in March, having fallen 0.1% in February. Whilst First time buyers may have been wishing for a price correction so that they would have a chance to get on the housing ladder, it is unlikely that they realised that to achieve that goal, the mortgage market would have to be sqeezed so badly that the mortgage rates would increase to the point where the fisrt time buyers would have to save thousands in deposit just to get in to the DIY shop, let alone pay the unusually high mortgage payments they would have to, to stay on the ladder.

Of course the effect of the falling man at the bottom reverberrates up the whole ladder.  Who an Earth am I going to sell my little starter house to, if not a first time buyer?

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